Project Materials on Credit management and the incidence of bad debt in Nigeria money-deposite banks. (A case study of union bank of Nigeria plc.)
CLICK HERE TO DOWNLOAD THE COMPLETE MATERIAL (CHAPTER 1 -5)
PASS 2024 UTME WITHOUT STRESS:- 👉 DOWNLOAD and PRACTICE with 2023 UTME CBT APP 📱👈
CLICK to DOWNLOAD NOW.:- 👉 PASS Your POST UTME by Downloading Your School's Post UTME Past Questions and Answers 📱👈
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is an accepted fact in Economic discourse that intermediaries such as Banks and Non-Bank financial institutions exist to ensure the transfer of financial surplus units to financial deficit units in any economy. Financial intermediaries make these funds available to deficit units or more broadly borrowers.
In the process of inter-mediation, the financial intermediaries incur costs and even losses. Hence the need to sustain investor confidence in the system through the provision of adequate controls.
The need for an effective and efficient system of debt administration, control and recovery is today of central importance to institutional lend-ers. We have come a long way from the days of easy and cheap money supply of the 1970’s. People will recall the halcyon era of the Udoji awards and oil boom when absorptive capacity was low and economic activity was essentially cash and carry. That was the era of “arm chair” banking.
Not so in the Shagari era of the early 1980’s when the bubble burst and economic stabilization measures were introduced. Money became tight and defaults in loan obligations started. Today institutional lenders are groaning under the weight of massive volumes of non-performing assets. Total bank credit to the domestic economy rose by 83.5% from 18.47 billion in December 1989 to 33.0 billion in September 1990. Outstanding non-performing loans stood at about 7.6 billion in 1990.
Up until mid-1989, it was still relatively easy to source funds in the desired volumes but tight monetary policy has since changed all that. The introduction of the prudential guidelines on loan loss provisions and the big bang of March 5, 1992 when the Naira went into free fall has put pressure on the cost of funds and reduced lending. There has been a lot of talk about bank defaults and the time has certainly arrived for these institutional lenders to take a fresh look at debt management.
In a modern economy,there is distinction between the surplus economic units and the deficit economic units and inconsequence a separation of the savings investment mechanism.This has necessitated the existence of financial institution whose jobs include the transfer of funds from savers to investors.
One of such institution is the money deposits banks, the intermediating roles of the money-deposit banks places them in a position of “trustees´´ of the saving of the widely dispersed surplus economic units as well as the determinant of the rate and shape of the economic development.
The techniques employed by bankers in this intermediary function should provide them with perfect knowledge of the outcomes of lending such that funds will be allocated to investments in which the probability of full payment is certain.However,in practise no such tool can be found in the decision of the lending banker. Virtually all lending decisions are made under creditors on uncertainty.
The risk and uncertainty associated with lending decision, situation are so great that the concepts of risk and risk analysis need to be employed by lending bankers in order to facilitate sound decision-making and judgement.
This statement implies that if risks are to be objectively assessed,lending decisions by the money-deposit banks should be based less on quantitative data and more on principles too subjective to provide sound and unbiased judgement.Furthermore,the banks depend heavily on historical information as a basis for decision making.
Apparently aware of the inadequacies of his decisions base,the lending banker has often sought solace in tangible and marketable assets as security giving the impression that lending against such securities is an insurance against bad debts.this makes the banker complacent with his loan portfolio.
The increasing trend of provisions for bad and doubtful debts in most money-deposit banks is a major source of concern not only to management but also to the shareholders who are becoming more aware of the dangers posed by these debts.Bad debts destroy part of the earning assets of banks such as loans and advances which have been described as the main source of earning and also determines the liquidity and solvency which generate two major problems, That is profitability and liquidity, has to earn sufficient income to meet its operating costs and to have adequate return on its investments.
1.2 STATEMENT OF THE PROBLEMS
The problem for this study is to appraise the prevention and recovery of bad debt of a typical Money-deposit bank (the Union bank of Nigeria Plc) with a view of finding the causes, consequences of bad debts in banks, recovery and prevention of bad debts.
Year after year, banks suffer much from the part of full loan extended which has for one reason or the other proved unrecoverable. Banks lose millions of Naira in various bad debts yearly and despite efforts by bank management, committee of chief inspectors and the bankers committee on the other hand, the wave of bad debts in banks is still on alarming proportion. This is gathered from a combination of literature reviews on the topic.
On the other hand, many banks experienced a lot of bad debts when the new government abandoned the project awarded to the contractors by civilian government. These contractors borrowed to execute the project awarded to them but could not repay the loan, due to government action on revamping the economy thereby abandoning the project. Other experiences were during the time of draught or poor rainfall and pest. These however led to low harvest which did not give the farmers enough time to repay their debt.
Again, experience may arise in respect of lapses on the part of the banks credit officers. For instance, there may be excesses over approved facility, unformatted facilities and expired facilities not renewed on time. In each of these cases the customer may easily deny even owing the bank all or part of the amount.
Money deposit banks have always borne the burden alone, but this may not continue in future as the banks may be unable to take the risk of lending more but when eventually they do, they would seek the best way they come out of the risk with a realistic reward which they are clearly failing to achieve at present.
1.3 OBJECTIVES OF THE STUDY
- To determine and appraise the lending procedure of banks using Union bank of Nigerian plc as a case study-with a view to highlighting the effectiveness and adequacy or otherwise the credit management policy of Nigerian banks in preventing and reducing the occurrence and consequences of bad debts.
- To highlight the rate at which inadequate collateral security provision by borrowers increases the incidences of bad debt in Nigerian.
- To determine whether fund diversion has any effect on bad debt of money deposit banks in Nigerian.
- To ascertain the extent to which government intervention in lending policies of money deposit banks has influenced bad debts in Nigerian money deposit banks.
- To highlight the extent to which improper project evaluation influence bad debt of money deposit banks in Nigerian.
RESEARCH QUESTIONS
In view of the consequences of bad debt in Nigerian money deposit banks, it is neccessary to formulate some research question which will enable the researcher formulate statistical tables for testing hypothesis.
- Has inadequate collateral security provision by borrowers caused bad debt in Union bank of Nigeria plc?
- Does fund diversion have any effect on bad debt of Union bank of Nigeria Plc?
- To what extent has government intervention in lending policies of money deposit bank influenced bad debt in Union bank of Nigeria Plc?
- To what extent does improper project evaluation influenced bad debt of Union bank of Nigeria plc?
CLICK HERE TO DOWNLOAD THE COMPLETE MATERIAL (CHAPTER 1 -5)
>GUARANTTEE|:| Score 280 Above in 2024 UTME👉 DOWNLOAD FREE JAMB CBT APP HERE:.: GURRANTTEE Score 280 Above in 2022 UTME👉 DOWNLOAD FREE JAMB CBT APP HERE 📱👈WISH TO STUDY & LIVE in UK?:- STUDY, WORK AND LIVE IN the UK Application Form NOW OUT. Call 08030447894
